Zaki Kulaibee Establishment v. Henry H. McFliker
2014 U.S. App. LEXIS 21805
| 11th Cir. | 2014Background
- Zaki Kulaibee Establishment (Saudi consignor) shipped ~150,000 line items (~5 million parts) to Airspares Network, Inc. (ANI) under a Florida-governed Consignment Services Agreement (CSA); Zaki retained title, ANI acted as consignee with duties to segregate, insure, sell, and account.
- Disputes arose after ANI allegedly sold Zaki’s parts through affiliated entities, reported only intermediate transfer prices (not final customer prices), concealed sales, and deducted inflated storage expenses; Zaki stopped renewing the CSA and demanded return of unsold parts upon termination.
- Parties executed a Settlement and Release Agreement (SRA) modifying reporting and offset terms, but Zaki alleges ANI continued underreporting, concealing sales, and manipulating storage offsets while withholding records and inventory access.
- Over two years of discovery, ANI produced incomplete accounting records, delayed expense documentation until too late for expert use, and obstructed an inventory count (municipal permit/code-violation issues), leaving Zaki unable to determine how many parts remained or the true sales/prices.
- District Court denied equitable accounting, held Zaki had an adequate remedy at law (breach-of-contract claim), sent remaining claims to a jury; jury found breach and awarded $312,500 (insurance-proceeds share), but Zaki appealed seeking a court-directed accounting to determine true damages.
- Eleventh Circuit reversed: held consignment created a fiduciary relationship and ANI’s failure to account and obstruction of discovery made legal remedies inadequate; remanded for an accounting.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Zaki was entitled to a court-directed accounting | Consignment made ANI a fiduciary obligated to account; ANI withheld records and inventory, so equitable accounting is necessary | An action at law for breach of contract and discovery sufficed; accounting unnecessary | Accounting required: fiduciary relationship exists and legal remedy inadequate in practice; reversal |
| Whether consignment imposes fiduciary duties | Consignee duties (accounting, disclosure) inherent in consignment and contract terms reinforced that duty | ANI acknowledged consignment but disputes extent of duties or compliance sufficed | Consignment imposes fiduciary-like duties, including duty to render true accounting |
| Whether discovery provided adequate alternative to accounting | Discovery failed: ANI withheld/produced incomplete records, delayed documents, blocked inventory — rendering damages unprovable | Discovery and produced summary reports were sufficient to try damages to a jury | Discovery was practically inadequate; court-directed accounting more effective |
| Whether district court abused discretion by denying accounting | Denial ignored Florida law that fiduciary/trust relationship alone warrants accounting | District court found remedy at law adequate and denied equitable relief | Court abused discretion; fiduciary status alone justifies accounting under Florida law |
Key Cases Cited
- Preferred Sites, LLC v. Troup Cnty., 296 F.3d 1210 (11th Cir. 2002) (standard for reviewing denial of equitable relief)
- McLeod v. Stevens, 617 F.2d 1038 (4th Cir. 1980) (remedy choice is governed by state substantive law in diversity cases)
- Dahlawi v. Ramlawi, 644 So. 2d 523 (Fla. 3d DCA 1994) (accounting appropriate where accounts are complicated and legal remedy inadequate)
- Armour & Co. v. Lambdin, 16 So. 2d 805 (Fla. 1944) (fiduciary relationships warrant equitable accounting)
- Masztal v. City of Miami, 971 So. 2d 803 (Fla. 3d DCA 2007) (broad definition of fiduciary duties where confidence is reposed)
- Quinn v. Phipps, 113 So. 419 (Fla. 1927) (historical articulation of informal fiduciary relations)
- Gadsden Cnty. Tobacco Co. v. Corry, 137 So. 255 (Fla. 1931) (definition and nature of consignment/factor relationships)
- Union Stock-Yards Nat’l Bank v. Gillespie, 137 U.S. 411 (U.S. 1890) (recognition that factor relationships contain fiduciary elements)
- Wilson v. Burch Farms, Inc., 627 S.E.2d 249 (N.C. Ct. App. 2006) (consignee must account to consignor after sale)
- Nebula Glass Int’l, Inc. v. Reichhold, Inc., 454 F.3d 1203 (11th Cir. 2006) (damages must be proven with reasonable certainty)
- Dairy Queen, Inc. v. Wood, 369 U.S. 469 (U.S. 1962) (equitable relief generally unavailable if adequate legal remedy exists)